The Rise Of The Better Indian Bank

Every month your bank reminds you that your credit card payment is due. But on the rare occasion that you forget to pay, I really doubt anyone bothers to check with you once more before slapping that late fee. Isn’t that strange considering your bank knows you intimately – your bank balance, creditworthiness, the fact that you always pay on time – and therefore knows with reasonable certainty that this is a one-off slip up? Shouldn’t the bank have at least shown you the courtesy of a call?
A bank that truly worked for the wellbeing of its customers certainly would have. This is what separates the better bank from the rest of the field. Unfortunately most banks do not live up to their promise of customer-centricity, or to their customers’ expectations. That leaves the door wide open for non-banking players, such as Fintech companies, to take a quick share of the market by offering products, services, solutions and experiences that really work in their customers’ favor. 
This is doubling the pressure on our financial services providers to shape up into better banks, distinguished by their commitment to offering contextual, relevant and proactive services to customers. Even if it means aggregating – and then suggesting and supporting – products and services from other institutions when they are better suited to a customer’s requirements. For instance, think about a scenario where ICICI Bank recommends a deposit product from Axis Bank, which suits your requirement better.

No doubt, this would call for a sizeable shift in the mindset of the Indian banking industry, not to mention time, effort and commitment. However, they can take heart from the fact that a number of helpful environmental factors are making this transformation into better banks easier.

Technologies, such as cloud, analytics and artificial intelligence have come of age in the past two or three years, bringing down the barriers to product personalization. Innovations in mobility and consumer touch points are converging to enable extreme personalization of the banking experience, to the extent that a bank can send a customer a unique offering crafted based on demographic, transactional, social and even Internet search behavior, on the time, device and channel of choice.

Today’s Indian consumers are open to change. The telecom experience holds a valuable lesson for India’s banks. Industry estimates suggest that nearly 75 percent of the subscribers signing up with a new wireless carrier every year are actually switching from another wireless provider. Never before have customers been this willing to switch providers when their demands aren’t met. Once plans for e-KYC take off, it will become really easy to open, close and move bank accounts for the fickle millennial consumer. A bank can look at this as a threat, or as an opportunity to wean customers away from its rivals by being the better bank.

Even regulators are playing a supportive role by pushing for reformative change in the form of initiatives like Aadhaar e-KYC and Unified Payment Interface. An example of the change in regulatory attitude from “controlling” to “catalyzing” is visible in the RBI’s policies on payment banks and small finance banks, as well as their inclination to make banking licenses available on tap in the future. Similarly, the Government’s focus on the troika of Jan Dhan, Aadhaar and Mobility (JAM) is proving transformational for financial inclusion. Banks should view the authorities’ proactive and benevolent interest in new, technology-led models of banking as boding well for the better, more progressive players among them.

But while banks should be glad of these tailwinds, the truth is they have no choice but to transform into better banks. With a variety of alternative providers ranging from retailers to mobile operators to tech giants to financial startups snapping at their heels, India’s banks cannot take their incumbency for granted. Their only way to beat these rivals is to better them.

This article first appeared in BusinessWorld. You can access the original article here.

Benefit with Blockchain

Some of you might have heard of Blockchain. You might have read that it could disrupt and change banking, payments and other financial services forever. Perhaps you are wondering how it might affect you, especially if you are employed in the financial services industry.

So let us clear the air to start with. Blockchain is the technology underlying the virtual currency, Bitcoin. But while Bitcoin has received a mixed response, there is widespread interest in Blockchain for a variety of reasons that we will talk about later. Many people believe Blockchain technology could revolutionise banking, payments and a host of allied activities.

Like every revolution preceding it, Blockchain too is giving rise to fears of job loss and redundancy. But actually every revolution in the past – whether it was the development of agriculture or the invention of electricity, radio, railroad or aircraft – has made human lives better than before. It is the same with the digital revolution, which, by giving us the tools of Internet and Mobility, has helped us to become more innovative and efficient, and amplified our potential in countless other ways.

Blockchain is no different. In fact, implemented right, it can deliver a variety of benefits as discussed in the following paragraphs.

Think of Blockchain as a very large, public spreadsheet in which various transactions are noted. A network of people or their representative computers has access to this spreadsheet, and is responsible for validating each transaction by consensus. Once a transaction is certified as genuine and consummated, it cannot be modified, recalled or repudiated. This makes the transaction highly secure.

In this scenario, there is really no need for a central agency, such as a stock exchange or clearing house, for bringing the contracting parties together or facilitating the deal. That means the parties to the transaction can conclude their business safely, securely and largely anonymously, without involving an intermediary. This yields several benefits – the parties have complete visibility into the transaction; there are no commissions or fees; and settlement can happen within seconds.

Blockchain can also be used to secure old-world transactions involving cash and plastic. One only needs to digitize the currency or card and register it on the network. Then, even if someone steals the money or card, they will not be able to transact with it, because the network will reject it as invalid. In India, the Reserve Bank is considering using Blockchain technology to reduce cheque counterfeiting. Digitized cheques can reduce the use of paper as well as the risk of theft and fraud. And if someone who continues to use paper cheques after digitization loses one, they are still protected because no other person will be able to use it.

Property transaction is another very obvious area of application, where everything from land records to sale deeds can be uploaded on to Blockchain for validation and protection both. The same applies to the sale and purchase of financial assets such as securities and insurance.

A very interesting feature of Blockchain is that it allows even very small investors to buy a share in highly valued assets, such as art, for instance. You might know that it is possible to buy a fraction of a Bitcoin, which is currently valued at about US$ 670, and trade it at will. Similarly, every other valuable asset can be digitized and broken into small components using Blockchain and offered to investors who cannot afford the whole.

These are some of the known benefits of Blockchain. As the technology matures and adoption increases, who knows what other possibilities might open up?

This article first appeared in Business Insider. You can access the original article here.